Financial results – July 2005

Since Oracle finalised the acquisition of PeopleSoft in January, its rivalry with its German counterpart in enterprise applications, SAP, has boiled over. As Oracle was announcing its annual results to Wall Street in late June, SAP was busy trying to knock confidence in the company by widening its ‘Safe Passage’ programme that subsidises organisations who want to move from PeopleSoft and JD Edwards packages to the mySAP platform. By the time SAP announced its latest figures a few weeks later, Oracle was gleeful that SAP had only managed to sign up 21 Safe Passage deals in the first six months of 2005.

Sniping aside, both company’s headline numbers looked good. SAP’s second quarter revenues of E2.02 billion ($2.4 billion) were an increase of 13% on the same quarter in 2004. Showing even greater buoyancy, software licence sales were up 16% to E576 million, accounting for 29% of the company’s total revenues. This significant growth came despite problems in both Japan and SAP’s home market of Germany. Software revenues dropped by 13% in Germany and by 11% in Japan.

EMEA remains SAP’s largest regional market, although growth, at 9%, was not as strong as elsewhere. That was made up for by excellent results in the US, where the company registered a licence revenue rise of 24% to E174 million, allowing it to take further market share away from competitors.

Breaking SAP’s figures down into different lines of business also reveals some mixed performances. Sales of customer relationship management (CRM) software, in particular, dropped by 3% to E107 million. AMR Research analyst Bruce Richardson was unconvinced by the official explanation of “seasonal” fluctuation, considering that last quarter’s CRM revenue increased by 21% from the corresponding quarter of 2004. Instead, he pointed to a greater emphasis on pushing the adoption of mySAP enterprise resource planning (ERP) software and the delay of the company’s CRM software as a service product as the source of downturn.

Software sales elsewhere were more upbeat: the ERP unit showed 19% growth, supply chain management 11%, product lifecycle management 17% and supplier relationship management 37%, with NetWeaver and related products a massive 89%.

Acquisition payback

Like SAP, arch-rival Oracle is, according to AMR’s Richardson, “clearly benefiting from customers’ desires to streamline the number of application and infrastructure providers they use”. Having absorbed PeopleSoft, Oracle’s topline numbers look good, with fourth quarter revenue to 31 May up 26% to $3.88 billion compared to the same period a year ago. That brought revenues for the whole year to $11.80 billion, a leap of 16%.

The growth, in the first full quarter since the acquisition, was fuelled by strong demand for its core database products. Lumping PeopleSoft and JD Edwards revenues with its own previously lacklustre application sales also contributed.

New database and middleware software sales were up 16% to $1.26 billion, bringing total revenues for the unit to $2.75 billion. On an annual basis, that puts its database business at $8.54 billion. CEO Larry Ellison cited analyst houses Gartner, IDC and Morgan Stanley as agreeing that “Oracle is increasing database market share while IBM’s DB2 database is in decline. This quarter marks an acceleration of that trend as more and more companies move their database applications off mainframes onto Oracle grids.”

But it was a different story with applications. By adding in the acquired revenues, Oracle was able to show a 52% jump in new licence sales for the quarter to $350 million and a doubling of the overall applications business for the quarter to $1.41 billion. However, this total was less than the combined Oracle and PeopleSoft licence sales of $361 million in the same period last year. Then, Oracle’s own applications business had been shrinking for four consecutive quarters; now its annual revenues total $3.58 billion.

Acquisitions are clearly making Oracle look in good shape. And Ellison has already spent $11.2 billion on four purchases in 2005.

Oracle and SAP, as much as they dominate their sectors, still have a long way to go to catch Microsoft at the top of the software league – although the gap is closing. Its year-end results took it to $39.8 billion, an increase of 8% over the year before. At the start of the year Microsoft had estimated growth of just 4%.

The rise in quarterly revenues kept in line with the yearly figures, increasing 9% to $10.16 billion, while net income leapt by 38% to $3.70 billion, representing a 36% net margin.

However, Microsoft’s two biggest divisions, Windows and Office are not growing at anywhere near the same rate as its smaller lines of business. While quarterly revenues from Windows client operating systems rose 10% to $3.03 billion, and server and tools sales were up 15% to $2.68 billion, revenues from its Office and other information worker software rose just 2.5% to $2.91 billion. Another weakness was its business applications division, where revenues were up 11% to $247 million for the quarter, but operating losses worsened to $76 million.

But with $37.75 billion in the bank – even after handing over tens of billions to shareholders – the company can easily afford to cross-subsidise areas where it still has unfulfilled ambitions.


Key supplier financial results – July 2005
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net Inc ($M)  
3Com Corp Networking systems 4Q05 02-Jun 176.6 -4% -58.3 -18.7
Accenture Ltd Consultancy and IT services 3Q05 30-May 4497.6 11% 305.3 210.4
Advanced Micro Devices Inc Microprocessors 2Q05 25-Jun 1259.9 0% 11.3 32.2
Ariba Inc E-procurement s/w 3Q05 29-Jun 77.7 47% -288.7 -7.6
Compuware Corp Prog tools, sys mgmt &services 1Q06 29-Jun 297.3 4% 24.6 0.6
EMC Corp Storage systems 2Q05 29-Jun 2344.8 19% 293.4 192.8
Entrust Technologies Inc Internet security s/w 2Q05 29-Jun 24.8 27% 1.1 -2.6
Epicor Software Corp Accounting s/w 2Q05 29-Jun 71.0 46% 28.2 5.6
F5 Networks Inc Internet traffic controllers 3Q05 29-Jun 73.1 65% 14.0 7.4
FileNet Corp Content management s/w 2Q05 29-Jun 104.6 11% 8.7 2.2
Foundry Networks Inc Networking products 2Q05 29-Jun 96.6 -1% 9.6 15.0
Geac Computer Corp Business applications s/w 4Q05 29-Apr 117.2 1% 18.6 23.8
Hyperion Solutions Corp Analytic applns &OLAP s/w 4Q05 29-Jun 189.0 7% 20.7 14.7
IBM Corp Systems, s/w &IT services 2Q05 29-Jun 22270.0 -4% 1829.0 1735.0
IFS AB* Business applications s/w 2Q05 29-Jun 74.5 3% 3.2 -12.0
Informatica Corp Data mgmt/integration s/w 2Q05 29-Jun 64.2 21% 7.6 1.0
Infosys Technologies Ltd S/w development services 1Q06 29-Jun 476.0 42% 122.0 83.0
Intel Corp Semiconductors 2Q05 01-Jul 9231.0 15% 2038.0 1757.0
Interwoven Inc Content mgmt s/w 2Q05 29-Jun 41.0 4% -0.1 -15.6
Iona Technologies Plc Object middleware s/w 2Q05 29-Jun 14.0 -8% -2.3 -1.9
Juniper Networks Inc Networking systems 2Q05 29-Jun 493.0 61% 89.0 -12.6
Keane Inc IT services 2Q05 29-Jun 237.8 3% 7.0 8.1
Lawson Software Inc Business applications s/w 4Q05 30-May 86.8 -13% 5.9 3.5
Lucent Technologies Inc Networking equipment 3Q05 29-Jun 2340.0 7% 372.0 387.0
Manugistics Group Inc Supply chain mgmt s/w 1Q06 30-May 46.7 -10% -4.9 -7.7
MapInfo Corp Desktop mapping s/w 3Q05 29-Jun 38.9 21% 2.7 1.6
Microsoft Corp Applns and systems s/w 4Q05 29-Jun 10161.0 9% 3700.0 2690.0
Misys Plc* Financial sector s/w 2H05 30-May 839.6 5% 14.0 2.4
MRO Software Inc Maintenance &operations s/w 3Q05 29-Jun 53.2 15% 4.1 3.1
Network Equipment Tech Inc Networking systems 1Q06 23-Jun 18.4 -37% -5.1 -0.8
Oracle Corp Database &applns s/w 4Q05 30-May 3878.0 26% 1022.0 990.0
PalmSource Inc Mobile operating systems 4Q05 02-Jun 17.3 -2% 18.3 -2.9
Parametric Technology Corp Engineering design s/w 3Q05 01-Jul 180.3 7% 26.7 16.1
Polycom Inc Voice &video conferencing s/w 2Q05 29-Jun 142.7 7% 20.0 12.9
Red Hat Inc Linux software 1Q06 30-May 60.8 46% 12.4 10.9
Research in Motion Limited Mobile communications products 1Q06 27-May 453.9 68% 132.5 55.0
RSA Security Inc Security s/w &services 2Q05 29-Jun 76.5 1% 8.5 8.0
Saba Software Inc Human capital mgmt s/w 4Q05 30-May 12.0 18% -0.4 -2.2
SAP AG* Business appln s/w 2Q05 29-Jun 2620.8 13% 375.7 323.7
Secure Computing Corp Security software 2Q05 29-Jun 26.1 18% 4.9 2.5
Stratus Technologies International Fault-tolerant server 1Q06 28-May 65.3 -3% -1.6 -4.1
SunGard Data Systems Inc Computer services 2Q05 29-Jun 977.9 12% 98.8 102.6
Sybase Inc Database &appln dev s/w 2Q05 29-Jun 204.4 9% 15.9 12.8
Tibco Software Inc Appln integration s/w 2Q05 28-May 101.4 25% 21.7 9.6
Unisys Corp Systems &services 2Q05 29-Jun 1435.5 3% -27.1 19.4
Verisign Inc Security s/w &services 2Q05 29-Jun 444.8 74% 41.3 21.9
Verity Inc Text search, content, portal s/w 4Q05 30-May 36.5 -5% 0.1 1.4
Vignette Corp Content management s/w 2Q05 29-Jun 47.0 0% 13.5 -6.2
Wipro Ltd* Offshore IT services 1Q06 29-Jun 523.6 29% 97.7 74.5
Xansa Plc* IT services 2H05 29-Apr 340.2 -4% 8.0 -38.4
*Figures converted into US$ at exchange rates averaged over the reporting period.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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